APPLICABILITY OF GST LAW ON EDUCATIONAL INSTITUTIONS
As per the present Service-tax law, all educational institutions are exempt from service-tax. In this regard, reference can be made to Notification on providing for exemption vide which all schools rendering education from pre-school to higher secondary level, are exempt. Further all universities providing qualification recognized by the Government are also exempt. All Government educational institutions including vocational education courses are also exempt. Educational institutions set up under specific Act are also exempt like Indian Institute of Management. In other words, all educational institutions except which are of commercial nature and carrying on coaching activities are exempt. It can be said that considering the importance of education, all educational institutional institutions have been kept out of purview of service-tax.
In the revised Model GST law, exemption has been provided vide Entry-3 of Schedule-IV only to Government or local authority or governmental authority carrying on activity of education. Accordingly, as per the proposed GST law only the Government educational institutions will be exempt. The term “Governmental authority” and “education” have also been defined in Schedule-IV to mean as under:
“Governmental Authority means a board, or an authority or any other body established with 90% or more participation by way of equity or control by Government and set up by an Act of the Parliament or a State Legislature to carry out any function entrusted to a municipality under article 243W or a Panchayat under article 243G of the Constitution.”
“Education services means services by way of:-
pre-school education and education up to higher secondary school or equivalent;
education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force; or
education as a part of an approved vocational education course.”
In view of above definition of governmental authority, exemption has been provided as per proposed law from GST only in respect of education being provided by institutions set up by the Government or where Government is having participation of 90% or more. As a result of aforesaid provision in revised Model GST law, all other educational institutions which are being run by other charitable institutions will become chargeable to GST. As per the proposal, rate of tax under GST which is likely to be applicable in case of educational services would be 18%. As a result of levy of GST on educational services, the cost of education in all private schools, universities, etc. will become costlier at least by 18%.
It can be said that the proposal, as it appears, to levy GST on educational services will not be fair and logical and it will not be in public interest. It is, therefore, desirable that the Government should re-consider this aspect and exemption should be provided as at present under service-tax law to all educational institutions including private institutions which are providing formal education or vocational education or education of higher level in a specialized field duly recognized by the Government.
In this regard, it may be stated that even if the exemption is provided from levy of GST by way of a Notification or exemption list, if the educational institutions referred above are covered under GST law, they will be required to comply with formalities under GST law. As provided under GST law, each entity covered under the law is required to get itself registered in each of the state from where services are being provided and the person has to file returns as required to be filed. As per the proposal contained in the proposed law, each person has to file at least three returns in each of the state every month and, therefore, there will be lot of compliance burden on every educational institution, whether small or big in case such institutions are not excluded from the scope of applicability of GST law.